Analysis of a company’s financial statements: Below are simplified versions of the balance sheet and income statement for Toys by Tom, Inc. Use this information to answer question 10.

A 15% increase in inventory turns for Toys by Tom, Inc. would bring this ratio to ____, suggesting ________ in ________.

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  11.

  The cash cycle measures the days required to produce finished goods or delivered services.

  • 13.

    The sustainable growth rate is the maximum growth rate achievable over an extended period of time.

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      14.

      The cash conversion cycle is calculated as:

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        15.

        Which of following are sources of cash in a statement of sources and uses? 

             I. Collection of accounts receivables 
        
             II. Reduction of long-term debt 
        
             III. Payment of dividends 
        
             IV. Reduction in the cash account

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          16.

          Which of the following actions, all else being equal, will increase the sustainable growth rate?

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            17.

            Biases can and should always be eliminated in financial forecasts.

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              18.

              Which of the following is commonly forecasted as a percent of sales:

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                19.

                External funding needs are computed as:

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                  20.

                  A perpetuity is a stream of cash flows that lasts forever.

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                    21.

                    The higher the opportunity cost of capital the higher the NPV.

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                      22.

                      A project with an internal rate of return greater than the cost of capital should always be accepted.

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                        23.

                        The phenomenon of compounding connotes which of the following?

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                          24.

                          If you invest $2,000 today for three years at 5% interest paid annually, you will earn a total of $_____ in interest. Assume you re-invest all interest.

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                            25.

                            Enterprise Free Cash Flows should include: 

                                 I. Capital expenditures 
                            
                                 II. Financing costs 
                            
                                 III. Taxes 
                            
                                 IV. Working capital requirements

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                              26.

                              You are trying to decide whether to accept or reject a one-year project. The project is estimated to generate $5,000 in incremental gross profit, which includes $200 in depreciation. Incremental SG&A expense is $400. At a 35% tax rate, the after-tax incremental cash flow is:

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                                27.

                                You are saving money for a down payment on a house. Suppose you want to have total savings of $20,000 in 10 years time and you have currently $5,000. What annual interest rate do you need to earn on your initial investment, assuming you contribute no additional savings?

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                                  28.

                                  What is the present value of a growing perpetuity that makes a payment of $100 in the first year, which thereafter grows at 3% per year? Apply a discount rate of 7%.

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